Government construction tops private home building

Al Behrman/AP

Cincinnati's Over-the-Rhine neighborhood is using federal and state funds to rehabilitate itself and spur new construction. Federal lawmakers have designated nearly $6 billion over the last year for local governments to buy and either rehabilitate or demolish foreclosed and abandoned homes.

For those concerned about the government's growing role in America's private sector, here's a tidbit: The government's share of construction spending reached a new record in March.

Nearly a third of the value of all building projects – 31.8 percent – was funded by federal, state, or local governments, the Commerce Department reported Monday. That's the highest total since the department began tracking the data in 1964.

Move over, home builders

It is also only the fifth month in all those 45 years that the government outspent private residential builders.

Usually responsible for 40 percent or more of all construction, private residential construction reached a record low of 26.7 percent, although an increase in private nonresidential (commercial) construction and public building projects boosted overall construction spending.

The only other time public construction topped residential private spending came in a stretch from December 1966 to February 1967. The main reason was a severe contraction in home building, along with a slight bump in government street and highway building. After February, residential construction rebounded quickly.

Forty-two years of private construction dominance was snapped this February, when the lines crossed yet again. Now the difference stands at 5 percentage points: the largest recorded gap.

Will residential home builders rebound as quickly as they did in 1967? Or is the government - with hundreds of billions of stimulus dollars yet to spend - set to become a bigger permanent factor in American construction?